Buffett uses annual letter to pan hedge funds

2016 was another good year for Warren Buffett's Berkshire Hathaway. Buffett released his annual letter to shareholders over the weekend, using the highly anticipated missive to speak highly of immigrants (no doubt a response to President Trump's recent commentary) and to tout the overall strength of Berkshire's investments.

In the letter, Buffett touched on the strong performance of one of his insurance businesses - GEICO, which had it's own rally in the second half of last year. The company is growing as insurance prices increase and consumers look for low-cost alternatives. He also emphasized the importance of Berkshire backed railroad BNSF to the overall transportation infrastructure of the US. All told, these investments increased Berkshire revenues. Earnings for 2016 came in at $17.5 billion, up from $17.3 billion in 2015.

He also used the letter to hit at hedge funds, which he said charge expensive fees for broadly underperforming lower cost index funds. In order to illustrate his problem with hedge funds, he revealed the results of a nine-year bet he has had with hedge fund of funds firm Protege Partners. That bet pitted an investment in hedge fund of funds against a standard S & P index fund overseen by Vanguard. Over the period the fund of funds did well up some 22 percent, but the basic index fund was up 85 percent and at a much lower fee structure.

"And, alas, the huge fixed fees charged by all of......................